This has been an amazing turnaround! We may not be out of the woods yet, but investors are moving beyond the Iran war.
Optimism about the end of Middle East hostilities is palpable as the market has already made up all losses from a rough March. The S&P 500 had fallen 7.7% in the month of March by the 30th. Since then, the index has rallied 10.5%. The S&P is now at a higher level than before the war began and within a whisker of the all-time high.
The market has made up for all the March losses and then some, before the war has even ended. It isn’t over. There could still be negative headlines that send stocks reeling. But investors are clearly looking toward the post-war market. And the market usually gets these things right.
The inevitable post-war bounce has come early. Soon we will see what lies beyond the war. It will likely be more uncertainty. The problem is that the war has further clouded what was an already uncertain economy over the remainder of the year.
High interest rates have been holding the economy back. They were trending lower, albeit slowly. But the inflationary pressures from higher oil prices, which will likely stay elevated for a while, could put the kibosh on that trend. More inflation is also cowing the Fed from lowering the fed funds rate. That anticipated stimulus may not arrive, or the rate will be cut much later than expected.
I’m optimistic. The U.S. economy is far more resilient than most pundits ever seem to give it credit for. It is also likely that AI is still in the early stages and the recent rally may continue. The economy was likely headed for a high level of growth. But the war probably put that off for a while.
Meanwhile, stocks are currently selling at very high valuations by historical standards after three years of high returns. The S&P can’t return 20% every year. A sluggish 2026 was always in the cards. And the war made it much more likely.
In times like these, it makes sense to go back to basics. We don’t know the future direction of the economy or interest rates or the next phase of the AI trade. But regardless of what happens with any of those market-driving issues, you can bank on the fact that people will still get sick, and older, and need medications.
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The fact that people need healthcare regardless of the state of the economy or the market puts those stocks among the most defensive on the market. If things go badly over the next several months, healthcare stocks are likely to hold up well. But today’s best healthcare stocks also tend to thrive in bull markets because it’s also a growth industry as the population continues to age at warp speed and demand ever more healthcare.
At the same time, many stocks in the sector are cheap. The sector has performed poorly recently, and many stocks sell at valuations far below those of the overall market. Stocks that are both defensive and cheap while also able to thrive in a strong market are a great way to play the uncertainty from the Iran war and beyond.
Here are three of the very best.
3 Healthcare Stocks to Bank on in the Post-War Market
McKesson Corp. (MCK)
McKesson Corp. (MCK) is a leading domestic wholesaler of branded, generic, and specialty pharmaceutical products. It has a solid base of over 40,000 customers and supplies about one-third of the U.S. drug distribution market. It’s a Goliath, with $398 billion in annual revenues.
Established in 1833 to import and sell therapeutic drugs, McKesson in one of the country’s oldest continuously operating businesses. Today, McKesson is a health care services company that distributes pharmaceuticals and medical supplies, and provides technology solutions to pharmacies, hospitals and health care providers.
An extensive distribution network and enormous scale give McKesson tremendous bargaining leverage with suppliers and customers that can’t be easily duplicated by would-be competitors.
That’s why the business is an oligopoly. McKesson, along with Cencora Inc. (COR) and Cardinal Health (CAH), accounts for 90% of the drug wholesale distribution market in the United States. In addition, there are very high switching costs among the providers, so they rarely lose business to the other two companies.
McKesson gets predictable earnings from the stable traditional pharmaceutical business while expanding capacity and the rapidly growing, high-margin, specialty drugs and biosimilars.
Pharmaceutical demand continues to rise every year at a solid pace because of the aging population. McKesson has a huge share of a business that will grow all by itself. That’s the advantage of a massive tailwind like the aging population megatrend.
AbbVie Inc. (ABBV)
AbbVie is a U.S.-based biopharmaceutical company formed in 2013 as a spinoff from Abbott Laboratories (ABT). AbbVie is a research-based pharmaceutical company that specializes in small-molecule drugs. It’s a cutting-edge company with strong exposure to high-demand needs in immunology and oncology, and it has a terrific pipeline.
AbbVie became an industry giant because of its mega-blockbuster drug Humira. It’s an autoimmune medication that became the world’s bestselling drug with annual sales of over $20 billion. But the tremendous success of that drug became a problem as Humira lost its patent overseas years ago, and it lost its U.S. patent in 2023.
Because of shrinking Humira sales, AbbVie posted lower year-over-year revenues in 2023 and the first half of 2024. But the company turned that corner. AbbVie has long planned for this eventuality and has done a stellar job launching new drugs capable of replacing the diminishing Humira revenue.
Humira accounted for 75% of revenue a few years ago. But new immunology drugs Skyrizi and Rinvoq together now have sales that already replace peak Humira revenues. In the most recent quarter, the two drugs had combined revenue of $7.4 billion and $25.9 billion for 2025, easily eclipsing the best Humira year. AbbVie has also guided for the two drugs to bring in $40 billion by 2029.
AbbVie returned to profitability in 2024. AbbVie has replaced the Humira revenue and is well on track for strong earnings growth in the years ahead. ABBV significantly outperformed the market when the patent cliff held it back. Imagine how it can perform now that it’s gone.
Eli Lilly and Company (LLY)
Eli Lilly and Co. (LLY) is a pharmaceutical giant that has delivered staggering returns. The stock has delivered returns of 152% over the past three years and 430% over the last five.
Indiana-based Eli Lilly is a global pharmaceutical company with over $65 billion in annual revenue, 41,000 employees, and sales in 110 countries. Founded in 1876, Lilly is noteworthy for its unusually high focus on research and development (R&D), where it historically allocates well over 20% of sales compared to an average of high teens for the industry.
The catalyst for the stock recently has been the mega-blockbuster weight-loss drugs. Weight-loss drugs are the hottest thing in the industry now because of the massive potential market where 30% of the population is obese, and there is a huge runway for growth. Its new weight-loss drug Zepbound and diabetes drug Mounjaro, which are its current weight-loss regimen, are killing it. Plus, Alzheimer’s disease drug donanemab also has mega-blockbuster potential.
In 2025, Zepbound and Mounjaro generated a staggering $36 billion. Growth is still strong as Mounjaro sales were up 110% in the last quarter to $7.4 billion and Zepbound sales grew 123%. The two drugs generated $11.7 billion in the fourth quarter alone.The company reported revenue growth of 45% and EPS growth of 96% for 2025. Lilly is guiding for full-year 2026 revenue growth of 25% and earnings per share growth of 49% at the midpoints.
The stock had been floundering. The price fell 16.5% in the month of March amidst the Iran war volatility. But a big event came on April 1st when the FDA approved the new oral weight-loss drug. The current drugs on the market require an injection, except for an oral drug made by Novo Nordisk (NOV), but Lilly’s drug is considered to be superior.
It could be a game-changer in the white-hot weight-loss drug arena. Drugs taken orally are more desirable and cheaper to manufacture. The weight-loss drug market is expected to reach $130 billion by 2030. The oral drug could give Lilly a huge further boost in this massive market.
You may look at the great performance and think you missed the boat. People said the same thing five years ago. LLY seems expensive with a forward price/earnings ratio of 27. But the PEG ratio, which factors in the expected growth rate, is less than one, signifying good value.
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